Monetary policy expectations are in focus for the Australian Dollar. The aftermath of Friday’s disappointing US Non-Farm Payrolls release proved quite telling. The Aussie rose even as stocks fell and the Japanese Yen – a currency traditionally on the opposite end of the risk sentiment spectrum from Australian unit – launched a formidable recovery. The move tracked a jump in the Australia-US 10 year bond yield spread, reflecting erosion in Fed monetary policy expectations relative to those of the RBA.

In the week ahead, this puts the spotlight on March’s Australian Employment report. Expectations point to a 2,500 increase in hiring, marking the smallest gain in three months. Meanwhile, the unemployment rate is expected to rise to 6.1 percent, the highest since July 2003. This sets the bar relatively low for an upside surprise, an outcome with distinct possibility considering Australian news-flow has outperformed consensus forecasts by the largest margin since May 2013 over recent weeks (according to data from Citigroup). Such a scenario is likely to further amplify the Aussie’s perceived policy advantage, allowing the currency to build on its latest gains.

The US side of the policy outlook equation will likewise find itself in flux as the Federal Reserve releases minutes from the March 18-19 meeting. That sit-down produced a notably hawkish shift in the central bank’s rhetoric and traders will be keen to parse through the conversation underlying policymakers’ confidence. The release will be bracketed by a busy calendar of official commentary, with speeches from the Fed’s Evans, Tarullo, Plosser and Kocherlakota (the lone dissenting vote at the March meeting) all due to cross the wires. Evidence pointing to QE cutback continuity can offer a lifeline to the greenback and cap AUD/USD gains.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.